October 23, 2019 / 3:08 PM / 10 months ago

EMERGING MARKETS-Brazil markets rise after pension reform approval, c.bank meeting awaited in Chile

    By Susan Mathew
    Oct 23 (Reuters) - Brazil stocks scaled new highs and the
currency posted modest gains on Wednesday after the Senate
approved a crucial pension reform bill, while Chile markets
weakened ahead of a central bank decision on interest rates amid
severe domestic unrest. 
    Brazil's Senate approved the main text of the government's 
landmark pension reform proposal late on Tuesday. Once voting to
approve the last four amendments concludes on Wednesday, the
bill will be cleared to be signed into law.
    The reform is seen by the government and many economists as
crucial to stabilizing Brazil's public finances and restoring
business confidence, conditions they say will lead to stronger
and more sustainable growth in Latin America's largest economy.
    In anticipation of the approval, bulls took the country's
benchmark stock index to an all-time high last session
and the currency had risen more than 1%. On Wednesday
both gained around 0.4%. 
    "Markets had already priced in the passage of reforms," said
Elisabeth Andreae, EM analyst at Commerzbank.
    She warns that looking ahead, there is limited appreciation
potential for the currency as there are other urgently needed
reforms and markets are a bit skeptical about their passage as
they may face strong resistance.     
    In Chile, the peso lost 0.4%, while stocks
shed 0.7%, ahead of a central bank meeting as the country braces
for more protests and a general strike by state workers on
    President Sebastian Pinera's announcement of ambitious
reforms failed to quell unrest that has rocked the country and
led to at least 15 deaths. Protests against high cost of living
were sparked by a recent hike in public transportation and have
been ongoing since the weekend.
    A Reuters polls earlier this month had shown expectations of
a quarter percentage point cut in rates, but analysts say the
protests have raised the possibility of a sharper 50 basis point
    "Recent domestic events should support (the central bank's)
easing bias," analysts at Morgan Stanley said in a note.
    "While we think that a 50bp cut is possible in today's
decision, we don't see it as the base case and think that the
governing board would prefer to leave the door wide open for
further cuts."
    The bank had slashed the interest rate by 50 bps last month.

    Most other regional currencies made minor moves against a
steady dollar. While Wall Street made lackluster moves
amid a slew of earnings, most Latam stock markets attempted
    Argentine stocks rose more than 1% to hit a 10-week

    Key Latin American stock indexes and currencies at 1443 GMT:
   Stock indexes            Latest    Daily %
 MSCI Emerging Markets       1030.07    -0.39
 MSCI LatAm                  2772.47     0.31
 Brazil Bovespa            107811.99     0.42
 Mexico IPC                 43379.77     0.04
 Chile IPSA                  4957.85     -0.7
 Argentina MerVal           33722.09    1.381
 Colombia IGBC              13073.43    -0.43
       Currencies           Latest    Daily %
 Brazil real                  4.0670     0.17
 Mexico peso                 19.1370     0.03
 Chile peso                    726.9    -0.43
 Colombia peso               3420.75     0.24
 Peru sol                     3.3468     0.07
 Argentina peso              58.8900    -0.32
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell)
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